Monday, September 18, 2006

Five Key Strategies for Making Metrics

One of the key things for any business serious about innovation is how to measure it, what metrics to use and where/when to use them appropriately. These of course need to be tied back some financial measure; such as the Innovation Revenue Growth Gap with key metrics and targets agreed with management at all levels of the organization. Without these being pre-defined what are organizations really aiming at? Committed targets for metrics are critical to driving innovation; having metrics will not drive it.

There are some nice points made in this article.

Firstly, rewarding innovative behaviors as people correspond to the metrics that you measure them against is key. If people aren’t rewarded and recognized, why should they participate? Also companies need to have meaningful/representative ways to evaluate ideas i.e. appropriate metrics for measuring new products, services and business models.

I find ‘connecting the metric to the rhetoric’ a facilitating point. If an employee is solely measured on the day-to-day performance, such as a call centre worker, or year-to-year performance targets such as a salesman without any tie to longer-term innovation goals - they are clearly not aligned with a company’s innovation strategy or the company with them. This is a very short sighted approach. Innovation should not be evaluated solely within such time limits as there effects, if given the appropriate time, can bring great rewards.

Having metrics that supports or can support all types of innovative ideas is critical. Otherwise great ideas maybe lost or cast aside as they don’t meet the criteria or have a process them forward appropriately if/once identified. This is not just about metrics that people can use to evaluate ideas but about the people who assess ideas themselves and their ability to reform the process to allow a great idea to be properly evaluated rather than dismissed out of hand for failing the current criteria.

Likewise having different measures for incremental and breakthrough innovation is key, as they need to be treated differently, not only in how they are measured but how they are developed. Breakthroughs can be hard to measure with precision, as a company may not have anything to compare with previous experiences on its performance. Although this can be grown as a company matures in producing breakthrough innovations.

Innovation process metrics are lead indicators of innovation success. Without them, how do you know you have arrived? How do you know if the process is working, how it can be imporved or what value it is returning for your investment?

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